HM Revenue and Customs (HMRC) has announced that the new convention for the avoidance of double taxation (DTA) signed between the United Kingdom and Spain will enter into force on June 12, 2014.
The agreement provides for a 10 percent maximum withholding tax rate on dividends, except where those dividends are paid out of income (including gains) derived directly or indirectly from immovable property within the meaning of Article 6 by an investment vehicle that distributes most of this income annually and whose income from such immovable property is exempted from tax. In the case of the latter a 15 percent rate shall apply. Exemption is allowed for companies resident in another contracting state, which controls, directly or indirectly, at least 10 per cent of the capital in the company paying the dividends (other than where the dividends are paid by an investment vehicle as aforementioned); or for a pension scheme which is a resident of the other contracting state.
Interest and royalty payments from a permanent establishment in the other contracting state are exempt on certain conditions.
The agreement is effective for withholding taxes immediately from the date of entry into force. It will be effective for all other taxes from January 1, 2015, in Spain. In the UK, the agreement will be effective for corporate tax for any financial year beginning on or after April 1, 2015, and for income tax and capital gains for any year of assessment from April 6, 2015.
